India’s manufacturing sentiment improved in the July-September quarter of FY27, according to the latest FICCI Manufacturing Survey. The survey showed stronger production, demand and capacity utilisation across major industries.

FICCI surveyed around 225 companies across nine manufacturing sectors. These included automotive, capital goods, chemicals, electronics, metals, textiles, apparel and technical textiles.

Production and Demand Improve

The survey showed a clear improvement in production. About 95 per cent of manufacturers reported higher or stable production in Q2 FY27. This was up from 77 per cent in the previous quarter.

Demand also strengthened. Around 90 per cent of respondents reported higher or stable orders. In Q1 FY27, the figure stood at 77 per cent.

The improvement suggests that manufacturing activity is recovering from the impact of geopolitical tensions and the West Asia crisis.

Capacity Utilisation Rises

Average capacity utilisation increased to nearly 75 per cent in Q2 FY27. It was 72 per cent in the previous quarter.

Export performance also improved. Around 80 per cent of manufacturers reported higher or stable exports compared with the same period last year. The figure was 74 per cent in Q1 FY27.

FICCI said these trends indicate improving business sentiment across the manufacturing sector.

Investment Outlook Remains Cautious

Despite the improvement, manufacturers remain cautious about new investments. The investment outlook for the next six months remained steady.

Companies continue to face several challenges. These include geopolitical uncertainty, tariffs, trade restrictions and uncertain demand. Skill shortages, raw material availability, logistics costs and regulatory issues are also affecting expansion plans.

Production costs remain another concern. Nearly 83 per cent of manufacturers reported higher production costs as a share of sales. This was 79 per cent in the previous quarter.

The average interest rate paid by manufacturers also increased to 9.1 per cent, compared with 8.9 per cent earlier.

Hiring Plans Improve

Employment prospects improved along with manufacturing activity. About 43 per cent of manufacturers plan to hire additional workers over the next three months. This was higher than 35 per cent in the previous quarter.

Overall, the survey points to a stronger manufacturing sentiment in India in Q2 FY27. However, higher costs and global uncertainty could continue to affect investment and expansion in the coming months.